- Marine fuels supplier Chemoil Energy said that it would build a new storage terminal in Panama with a capacity of around 245,000 tonnes. [ID:nSGC001085]

- StarHub Ltd (STAR.SI: Quote, Profile, Research), Singapore's second-largest telecoms firm, said it would promote its integrated product and marketing head Mike Reynolds to the position of group president from next year. [ID:nSGC001084]

- TeleChoice International (TCIN.SI: Quote, Profile, Research), which distributes telecommunication devices, said it has entered into a two-year agreement with StarHub worth S$130 million ($87.8 million) in revenue every year. [ID:nSNA340581]

- CapitaLand's (CATL.SI: Quote, Profile, Research) Chief Executive Officer and President Liew Mun Leong said in a media briefing that the company aims to have five more Raffles City Developments within the next five years as well as manage 10 real estate investment trusts within "a relatively short time".

The Monetary Authority of Singapore (MAS) has issued revised Property Fund Guidelines (REIT Guidelines). The revised Guidelines are intended to improve safeguards for investors and to provide greater clarity and flexibility for commercial transactions. The Guidelines have also been rationalised to reduce compliance costs in a number of areas. The changes include:

Enhancing the disclosure requirements on the use of short-term yield-enhancing arrangements; Providing guidance on permissible fixed-term management contracts; Disallowing discounts to institutional investors for subscriptions made at the time of listing of a REIT; Specifying safeguards for REITs that intend to pay dividends in excess of current income; Requiring a REIT to invest at least 75% of its assets in income-producing real estate; and Removing the 5% single party limit for investments in real-estate related securities.

MAS will amend the Securities and Futures Act (SFA) to include REIT management as a regulated activity. The Securities and Futures (Licensing and Conduct of Business) Regulations and Securities and Futures (Financial and Margin Requirements for Holders of Capital Markets Services Licences) Regulations will also be amended to set out the capital requirements and licence fees for REIT managers, as well as provide for a transitional period for existing industry participants.

In revising the REIT Guidelines, MAS considered feedback from its public consultation in March this year and held discussions with REIT players. Our responses to the comments received from the public consultation are published on the MAS website. MAS will continue to engage industry players and ensure that our regulatory regime remains progressive and keeps pace with the market’s development and growth.

NEW government figures released yesterday will bring cheer to the average Singaporean homeowner.

This is because prices for so-called ‘mass market’ properties - comprising mainly suburban condominiums and HDB homes - have posted their best quarterly growth in years.

This has brought the prices of both public and private homes to their highest level in a decade.

The flash estimates for the third quarter, which are based on home sales in July and August, show that private home prices rose 8 per cent, while prices of HDB homes jumped 6.5 per cent for the same period.

The numbers show that the effects of Singapore’s property recovery, which have been largely focused on high-end luxury apartments for the last year or so, are finally filtering down to the typical homeowner.

Most significantly, prices of non-landed private homes outside the central region - in areas such as Clementi and Bedok - surged 8.1 per cent, almost on par with the increase of 8.3 per cent for homes in the core, or central, area.

Growth in prices of homes located in prime areas like districts 9, 10, 11, downtown and Sentosa have far outstripped that of suburban homes since 2004, the earliest period for which price changes in different districts are available. But the gap in price increases has now narrowed to just 0.2 percentage points.

Property analysts say the figures show a confident local market generally unshaken by the recent volatility in the stock market - due to the sub-prime mortgage crisis in the US.

Savills Singapore’s director of marketing and business development Ku Swee Yong said future growth is now likely to be fuelled ‘from the bottom up’ by mass market homes.

CBRE Research’s executive director Li Hiaw Ho also marked this quarter as a ‘big step’ for suburban projects, which were launched at $850 to $1,000 psf.

Suburban projects were usually defined as those costing around $600 psf - but projects like The Parc Condominium in West Coast, for example, fully sold all 659 units in August at a median price of $880 psf, said Mr Li.

Meanwhile, HDB home prices are also driving the mass market recovery. The 6.5 per cent jump in prices is the highest since 1999, and comes on the back of a 3 per cent rise in the last quarter.

‘HDB home prices have languished in the doldrums for many years so it’s heartening for homeowners to see them pick up pace now,’ said property firm Propnex’s chief executive Mohamed Ismail.

The bullish figures have prompted some analysts to revise their forecasts. Property experts say private home prices have increased 21.1 per cent so far this year, already surpassing their forecasts of between 20 and 25 per cent.

Knight Frank’s director of research and consultancy Nicholas Mak gave a revised forecast of between 23 and 32 per cent.

As for HDB homes, Mr Mohamed expects the HDB price index to rise 15 per cent for the whole year.

Last year, in comparison, HDB’s price index only rose 2 per cent for the whole year, while for private homes, it was about 10 per cent.

The Government also highlighted that about 43,000 new private homes are expected to be completed from now till 2010, and almost half are still unsold.

Separately, the HDB also said it plans to launch up to 6,000 new homes in the next six months, subject to market demand.

The Urban Redevelopment Authority and HDB’s official third-quarter statistics will be released at the end of this month.

SINGAPORE‘S hotel sector is currently enjoying a new surge of energy and opportunities brought about by the government’s efforts to reinvigorate tourism.

Complementing efforts by the Singapore Tourism Board (STB) to raise visitor numbers to 17 million by 2015, the government had in recent years released more sites for hotel development under its Government Land Sales (GLS) programme to meet the anticipated accommodation needs.

The state land tenders have generally been met with keen industry interest, buoyed by the strong trading conditions that have prevailed with the current strong demand and tight room supply. This is a stark contrast to the 1990s when the government announced a hotel safeguarding policy in 1997 to check the creeping trend of hotels being converted to residential use.

Latest numbers from the tourism authority showed a total of 225 hotels and 36,891 rooms in Singapore’s accommodation market as at end-2005. There is no existing star-rating system in Singapore and the current hotel stock is sub-divided into 103 gazetted hotels (30,445 rooms) and 122 non-gazetted hotels.

Jones Lang LaSalle Hotels estimates that around 81 per cent of the gazetted 30,445 rooms fall within the upper-tier four-star and five-star hotel segments.

Geographically, the majority of these upper-tier hotels are concentrated along the traditional hotel belt: Orchard Road, City Hall, Suntec City/Marina Centre, Bras Basah/Bugis and the CBD/Boat Quay/Clarke Quay.

Familiar international brands found within these localities include the Ritz-Carlton, Marriott, Grand Hyatt, Hilton, Shangri-La, Four Seasons, Raffles, Swissotel, Traders, Pan Pacific, Conrad, Meritus, Novotel as well as The Oriental Singapore which was re-named the Mandarin Oriental Singapore from Sept 25.

Outside of these locations, a cluster of smaller, self-managed budget or boutique hotels have emerged in the Chinatown, Little India and Geylang/ East Coast/Joo Chiat areas.

Sentosa Island is now home to a handful of mid- to high-end hotel properties such as The Sentosa Resort & Spa, Shangri-La’s Rasa Sentosa Resort and the new Amara Sanctuary Resort Sentosa.

A more exciting local hotel scene is unfolding with a new cast of players, additional brands and creative product concepts. Riding on the opportunities presented by the renewal of the tourism industry, international hotel management companies such as Accor, Starwood Hotels & Resorts and the InterContinental Hotels Group (IHG) are growing their presence in Singapore by bringing in other brands from their portfolios that are currently not in this market.

Ranging from boutique to mid-tier to luxury establishments, many of these new hotel developments are being established in non-traditional hotel locations such as Tanjong Pagar, One-North, Labrador Park and Novena areas. A new 320-room Crowne Plaza, a brand from the IHG family, is scheduled to open at the Singapore Changi Airport next year.

United Engineers, a local developer with a strong focus on the residential sector, has announced plans to build a business hotel at Singapore’s biosciences hub at South Buona Vista. With the latest GLS programme for the second half of 2007 including sites like Jalan Bukit Merah/Alexan- der Road, Outram Park and Kampong Glam for hotel development, more hotels can be expected to spring up outside of the typical hotel hot spots.

The two upcoming mega integrated resorts (IRs) at Marina Bay and Sentosa will also be the launch-pads for new hotel brands and concepts. While Sands @Marina Bay will offer 2,500 rooms in the upper-tier sector in 2009, Resorts World @Sentosa will add another 1,830 rooms in six hotels in 2010.The latter will comprise a Hard Rock Hotel, the Hotel Michael boutique hotel, the Festive Hotel with a Hollywood theme, an iconic Maxims Residences, the Equarius Hotel with a lush greenery theme and the ESPA Villas.

Resort and villa-type establishments, too, are making a stronger statement in Singapore. Apart from the ESPA Villas, Villa Raintree @Labrador Nature Reserve (a refurbishment project) as well as the recently opened Amara Sanctuary Resort and the upcoming Capella Singapore at Sentosa fall under this category.

Meanwhile, the luxury hotel segment will soon witness the opening of the 299-room St Regis Hotel at end-2007. Sino Land plans to open a new 120-room boutique hotel at Collyer Quay in 2009, while a new 320-room W Hotel at Sentosa Cove is expected to be operational by the end of 2010.

The entry of these new hotels will up the ante in Singapore’s luxury hotel segment, which currently comprises the Four Seasons, Shangri-La, Ritz-Carlton and The Fullerton.

The present lack of quality branded mid-tier accommodation options has created opportunities for new niche developments that are targeted at specific market segments. For example, Far East Organization’s upcoming hotel at Sinaran Drive next to the Tan Tock Seng Hospital will cater to the needs of the growing inbound medical tourist segment.

Similar opportunities are available at a government ‘white’ site on the current Reserve List that is located at Outram Road/Eu Tong Seng Street to develop a 555-room hotel near the Singapore General Hospital.

The proliferation of low-cost carriers in Asia has also fuelled the growth of lower-tier segment, with the new Ibis Hotel scheduled to open at Bencoolen Street in 2009 a case in point. More recently, the Hong Leong Group has linked up with Istithmar PJSC and Tune Hotels.com to open around 30 budget hotels in South-east Asia, including Singapore.

The completion of the Marina Bay and Sentosa IRs as well as supporting infrastructure and tourist attractions in the Marina and Sentosa vicinities will collectively cultivate an environment conducive for the entry of differentiated quality and luxury hotel products to the Singapore marketplace.

The arrival of new brands and new-generation properties such as W, Westin, Fairmont, emerging Middle East Groups like Jumeriah and from the Indian sub-continent, groups like Taj and Oberoi, will provide synergy for the broader local hotel market and is anticipated to generate a wider geographical capture and mix of tourist traffic to Singapore.

In the longer term, new hybrid products such as condotels (or condo-hotels) that are established in the US but still relatively untested in Asia, may be introduced, although the success of such products will hinge on the regulatory framework.

In the meantime, with a wider selection of accommodation offerings to suit the different budgets and expectations of visitors, guests can look forward to a more varied and interesting stay experience in Singapore.

BIG gun property developers who lined up for a prime residential site in the Kovan area were pipped in the bidding by a firm hardly anyone has heard of.

Duke Development placed the top bid of $290 million for the 190,000 sq ft site in Simon Road, trumping high-profile rivals Far East Organization, Hong Leong Holdings, Frasers Centrepoint and Allgreen Properties.

Duke is believed to be a group of private investors with a pair of top dealers as shareholders.

A company search turned up Mr Han Seng Juan and Mr David Loh as Duke shareholders. They are former executive directors at UOB Kay Hian, the brokerage arm of United Overseas Bank.

Both Mr Han and Mr Loh, who are believed to be related, also hold shares in Cybertech Communications and Healthstats International, among other companies.

Their winning bid works out to about $437 per sq ft (psf) per plot ratio, and is a ‘reasonable bid’, said CB Richard Ellis Research executive director Li Hiaw Ho.

Mr Li believes this offer can break even at about $800 psf for the finished condominium units, which are likely to sell at between $850 psf and $950 psf.

Nearby Kovan Melody has sold out all 778 units, a testament to the strong demand for homes in the area. The units are now being resold in the secondary market for more than $800 psf, said Mr Li.

He added that part of the area’s attraction are the good schools in the vicinity, such as Rosyth School and Maris Stella High School.

A condominium with about 555 units can be built on the Simon Road site, which has a maximum gross floor area of 664,337 sq ft.

Apart from homes, the plot can also host service apartments, said the Urban Redevelopment Authority.

A COMPANY controlled by stockbrokers Han Seng Juan and David Loh Kim Kang of UOB Kay Hian yesterday emerged as the surprise top bidders for a 189,812 sq ft site next to Kovan MRT Station and the Kovan Melody condo.

Through Duke Development Pte Ltd, they bid $290.02 million or $436.55 psf per plot ratio (psf ppr) for the 99-year leasehold site, which can be developed into a condominium project with possibly about 600 units averaging 1,200 sq ft.

Duke Development outbid five other contenders at yesterday’s state tender conducted by Urban Redevelopment Authority. The others were:

Far East Organization’s Bishan Properties, which bid $280.1 million or about $422 psf ppr;

A tie-up between Hong Leong Holdings unit Kingston Development and ASPF II Delta GmbH ($273 million or $411 psf ppr);

GuocoLand unit GLL Ventures ($227 million or $342 psf ppr). Property market players were busy yesterday evening trying to find out just who Duke Development was. The company is a fully owned subsidiary of Duchess Development, whose shareholders are Mr Han, Mr Loh and Angela Loh Moo Cheng, a companies search showed.

Mr Han and Mr Loh, in addition to being prominent stockbrokers at UOB Kay Hian, are also known to be corporate investors, who control stakes in companies like Summit Holdings and Pine Agritech.

They are also well known for pre-IPO China investments, and are dubbed the ‘David and Han Team’ and ‘The Dream Team’, according to stockbroking circles.

Industry players believe that based on Duke Development’s top bid of $437 psf ppr at yesterday’s tender, its break-even cost for a new condo development on the site could be in around $730 to $750 psf.

CB Richard Ellis executive director Li Hiaw Ho said: ‘It is likely the selling price would range from about $850 to $950 psf. The 778-unit Kovan Melody has sold out and there could be pent-up demand for new homes in this location. Units in Kovan Melody in the secondary market were transacted recently in the low-$800 psf range.’

Prices of suburban condo sites have been rising as the residential recovery spreads to the mass-market. Last month, a plum 99-year condo site next to Ang Mo Kio MRT Station fetched a top bid of $601 psf ppr, a new record for a suburban condo plot.

Mr Han and Mr Loh are well known for pre-IPO China investments and are dubbed the ‘David and Han Team’ and ‘The Dream Team’, according to stockbroking circles.

TWELVE floors in Springleaf Tower that were bought in January for $134 million have been sold again for $225 million - an increase of almost 70 per cent.

The seller is Macquarie Global Property Advisors (MGPA) which made headlines recently by submitting the top bid of $2.02 billion for a development site at Marina View.

The buyer of the SpringLeaf Tower space is SEB Asset Management (SAM), part of German pension fund manager SEB, which bought SIA Building from CLSA Capital Partners in April for more than $525 million.

SAM said in a statement yesterday the Springleaf Tower investment is its second in Asia for its new SEB Asian Property Fund, after it acquired an office tower in Shanghai’s Puxi district in a 50-50 joint venture with Pacific Star at the beginning of September.

In Singapore, churn in the office sector appears to be increasing.

CLSA Capital Partners, for instance, acquired the SIA Building for $344 million in June 2006 before selling it less than a year later for 50 per cent more.

MGPA acquired Temasek Tower in March for $1.04 billion. And with capital values rising, it too could sell for a quick profit.

According to a report by CB Richard Ellis (CBRE), the average capital value of prime office space was an estimated $2,900 per square foot in Q3 2007, reflecting an increase of 16 per cent quarter on quarter and 114.8 per cent year on year.

CBRE said prime office yields were 4.32 per cent - up only slightly from 4.23 per cent in Q2 2007. But that has not stopped investors buying offices.

It said the office investment market remains active, with $3.459 billion of transactions in the third quarter. Notably, a fund linked to Goldman Sachs bought Chevron House for $366.4 million or $2,780 psf of net lettable area, setting a new benchmark that exceeded the $2,650 psf that British-based property fund Develica paid for One Finlayson Green in June.

SAM expects an internal rate of return of 9 per cent per annum on its investments.

SINGAPORE’S property market is setting the pace as real estate prices soar across the Asia-Pacific region.

The country posted a ‘remarkable house price growth’, year on year, of 21.05 per cent for the 12 months ended June, up from 6.08 per cent the previous year, an online research house, Global Property Guide, said yesterday.

That placed it fourth in the overall ranking of 42 countries and top in the region.

Singapore’s property market recovery from an ‘eight-year house price slump’ was ‘thanks to its booming economy’, the report added.

Top spot went to the Baltic state of Latvia while its neighbour, Lithuania, came in third. Bulgaria was second. All three recorded price rises of 25 per cent or more for the year ended June compared with the same period a year ago.

Some other Asia-Pacific economies that made the rankings included the Philippines, which had price growth of 14.29 per cent, placing it seventh, and Hong Kong - in 14th position with 8.78 per cent growth.

Unlike most Asian countries, Thailand’s prices dropped by 3.47 per cent for the period after a rise of 3.92 per cent for 2006.

While prices in the Asia-Pacific are heating up, Europe’s price growth continues its moderate trend, said the report.

There’s an indoor lap pool, eight-car garage and four-storey elevator. But the 26,000 sq ft Tuscan-style home features something even more unusual in this ritzy suburb of gated estates and mansions - a US$3 million discount on its price.

As the credit crisis started to shake global financial markets in August, the owners of the nine-hectare estate at 309 Taconic Road in Greenwich, Connecticut, cut their price to US$19 million, showing turbulence in the US housing market penetrating the wealthiest strata of American society.

‘People are looking instead of buying, maybe since the second week of August,’ said Julianne Ward, director of fine homes at broker Prudential in Greenwich, a coastal town of 61,000 about 48 km from New York City.

Until recently, the nation’s most extravagant homes had defied the two-year slide in prices and surge in foreclosures roiling the broader property market, where existing home sales are down more than 20 per cent from a 2005 peak, according to industry data.

Ultimate Homes, a publication that ranks the nation’s 1,000 priciest homes, began its survey in 2005 with the cheapest on the list at US$7.9 million. That jumped to US$10 million this year with a record six homes now selling for US$100 million or more.

‘In the last couple of years, the most expensive home on the market has gone from US$75 million to US$165 million,’ said Rick Goodwin, the magazine’s publisher. ‘This market is still very strong. The rich are doing very well.’ The nation’s wealthiest communities were largely unscathed by turmoil in the broader housing market through the second quarter of this year, according DataQuick, which analyses data on real-estate markets nationally.

In California, for example, the number of homes that sold for US$10 million or more rose nearly 40 per cent between the first quarter and second quarter, while the number in New York grew 15 per cent and Connecticut’s more than doubled, according to public records examined by DataQuick.

DataQuick mines records where a price or loan amount is available, which means there can be some gaps, but the numbers are a reliable indicator of trends, said DataQuick analyst Andrew LePage who compiled the data for Reuters.

‘Certainly through mid-summer it appears to be holding up just fine, and faring better than most other segments of the market,’ he said of homes selling at US$10 million or more.

Like the Bel Air section of Los Angeles and many other exclusive coastal communities, Greenwich has a long association with wealth. Its typical family earns more than US$120,000 - more than double the national average - while its investment bankers are among the country’s highest paid, taking home on average US$23,846 a week - 28 times the national average, according a recent government survey.

But the global credit crunch is stirring caution among its newest crop of wealthy elite. Greenwich is the unofficial capital of the US hedge fund boom. More than 100 of the private investment pools for the wealthy have set up in the town. That worries economist Edward Deak at Fairfield University in Connecticut. ‘The hedge funds, private equity firms are taking a hit,’ he said. ‘I’m concerned about what the mortgage meltdown is going to mean for bonus incomes coming into Connecticut in January ‘08 and also January of ‘09.’

Some developers are changing course, or delaying the start of sales or construction.

‘Buyers are doing a lot more due diligence and not pulling the trigger as quickly,’ said Ms Ward, who has sold real estate in the town for more than two decades.

A vivid illustration of the divergent housing trends of the last two years is on display about an hour-and-a-half drive from Greenwich on Avon Mountain in West Hartford, Connecticut, where local businessman Arnold Chase is building a new home.

His 53,000 sq ft estate, complete with 100-seat cinema, would be New England’s largest private home, eclipsing even the mansions of Newport, Rhode Island, that typified the gilded age of America’s industrial revolution. ‘At the highest end, there’s been no slowdown at all,’ said Joseph Beninati, partner and co-founder of Antares Investment Partners, a private-equity and development firm that caters to Greenwich’s hedge funds.

According to town records in Greenwich cited by Antares, the number of closed transactions on homes sold at prices greater than US$8 million grew 50 per cent in 2006, a record. Mr Beninati said he expects that figure to rise again this year.

‘The luxury market tends to be a little isolated from the market swings. This time around it’s a little different because the bottom half of the upper tier is softening a bit,’ said Laurie Moore-Moore, founder of the Institute for Luxury Home Marketing, a trade body for high-end property brokers.

The bottom tier comprises homes that sell for US$2 million or less, she said. ‘As the market softens I think we are seeing that segment of the market falling out,’ she said. — Reuters

They could get a higher sales price if their objections to the sale are valid, while the provision for a change of mind following the signing of the collective agreement is generous, they said. Lawyer Sim Bock Eng from Wong Partnership said: “This five-day cooling-off period excludes weekends and public holidays, allowing minority owners to review their decision and alleviate any pressure.”

The event comes at a time when the en bloc frenzy shows little sign of easing despite government measures.

Ms Sim said the raft of requirements for setting up a sales committee protects minority owners. Before the changes, a one-man committee could be set up; now, at least three owners are needed. And members of the committee have to be elected at a general meeting and must declare any relationships with developers, marketing agent or legal firms that might incur a possible conflict of interest.

The new provisions also improve en bloc proceedings, which typically take 31 months to complete, noted Mr Chan.

Meanwhile, the Law Ministry has advised that ongoing en bloc sales without a majority of owners’ consent — 80-per-cent (for developments 10 years old or older) or 90-per-cent (below 10 years old) — have to comply with the new provisions. Those with the majority consent are exempted.

NEW collective sale regulations will kick in today - a few weeks earlier than many in the industry had expected.

The rules, which were passed in Parliament two weeks ago, were expected to take effect this month, but a date had not been specified.

The much-anticipated announcement, which came yesterday, took some en bloc players by surprise.

‘We thought it was going to be later, and expected the Government to give more lead notice as well,’ said Mr Jeremy Lake, executive director of investment properties at property firm CB Richard Ellis (CBRE).

He added that ‘initial indications were that they were likely to kick in only at the end of the month’.

The changes are aimed at making the sale process more regulated and transparent.

They require more conditions to be fulfilled, such as adhering to stricter requirements on setting up a sales committee and providing a five-day cooling-off period for owners to change their minds after signing the collective sale agreement.

The changes will apply to all developments that, as of today, have not obtained consent from enough owners to go en bloc - 80 per cent of owners by share value, or 90 per cent for estates less than 10 years old.

It will be back to the drawing board for the owners of these developments, who will have to start the collective sale process all over again and do so by the new rules.

Most property firms said they each had ‘two or three’ en-bloc estates that will be affected by today’s changes.

But CBRE’s Mr Lake expressed relief that there was clarity on when the rules would finally kick in.

Indeed, for the last few weeks, a few projects had been suspended because no one knew when the changes would take effect, said Mr Tan Hong Boon, executive director of Credo Real Estate.

‘Most lawyers were also not prepared to quote their fees for new en-bloc projects because they didn’t know how much more work they would have to do under the new rules,’ added Mr Tan.

Some consultants scrambled last night to get the last one or two signatures.

Mr Steven Ming, director of investment sales at Savills Singapore, said he had expected to have ‘one or two more weeks to get the last few signatures’.

‘I guess I will have to work overnight,’ he joked.

Other consultants, such as Jones Lang LaSalle’s head of investments, Mr Lui Seng Fatt, said they have been advising would-be en-bloc sellers to follow the new rules since last month.

THE ‘David and Han Team’ of top stockbrokers that has been awarded a condo site in Kovan for $290.02 million, is looking at more property ventures in Singapore and the region across various sectors, including residential, office and hotels.

The Kovan condo will be the duo’s maiden property development project, and they are expected to rope in some ’strategic partners’, including a construction firm for the project.

‘The condo is likely to have around 500 to 600 units, and could be launched sometime in the second half of next year. We’re looking at an average selling price above $850 per square foot, but of course if the market goes up, we’ll be very happy,’ says Tony Bin, CEO of Duchess Development, the holding company of Duke Development, the vehicle that Han Seng Juan and David Loh Kim Kang used to bid for the 190,000 square feet site next to Kovan MRT Station at a state tender that closed on Tuesday.

The $290.02 million bid for the Kovan site reflects a unit land price of $437 psf per plot ratio, and based on this, market watchers reckon the breakeven cost for the new condo works out to around $730-750 psf.

Mr Han and Mr Loh work at UOB-Kay Hian and are also well known as pre-IPO China investors. ‘They are diversifying into property,’ as Mr Bin puts it.

The two men will only be investors/shareholders and not be involved in the management of Duchess Development, which will be left to a professional team, added Mr Bin, who was formerly general manager of the property division of Guthrie GTS.

Market watchers reckon that given Mr Han’s and Mr Loh’s strong interest in China, it would not be surprising if they could also be looking at property ventures in that market.

Still, Senior Counsel K Shanmugam of Allen & Gledhill (A&G), acting for the Hotel Properties consortium, was not spared heckling by majority owners seated in the public gallery when he sought permission from the court to address submissions made by the minority owners the day before.

Senior Counsel Michael Hwang, representing one of the minorities, opposed the move vigorously, arguing that only the applicants for the appeal - that is the majority owners, represented by the sales committee and their lawyers, Tan Rajah & Cheah - be allowed to reply to earlier submissions.

Judge Choo Han Teck proposed a middle ground: he will accept a written reply from Mr Shanmugam, but not an oral rebuttal, after the session.

Overall, the session was relatively calm, with Senior Counsel Chelva Rajah of Tan Rajah & Cheah, representing the majority owners, replying to submissions made by the minorities.

Mr Rajah rebutted the minorities’ claims that three missing pages could render an entire collective sale application null and void. At the heart of this appeal is whether the Strata Titles Board (STB) was right, in August, to throw out Horizon Towers’ application because it was missing three signature pages.

‘There has to be some proportion to this,’ Mr Rajah exhorted. He said that if the missing pages were substantial, then he would agree that it could be considered invalid. But, in the case of Horizon Towers, the three signature pages of the collective sale agreement - appended to the application - were only accidentally left out.

‘And it’s not really three pages, because one of the pages was there - but it was a copy of the faxed version, rather than the original - so it’s actually just two missing pages in question,’ Mr Rajah added. ‘Nothing can be more minor than this.’

He also cited the case of Dragon Court’s en bloc sale in 2003. The case went to court on a similar issue of missing disclosure. In that case, it was not disclosed that some of the owners were linked to the buyer. But the High Court allowed that application to stand, because the non-disclosure was subsequently made to the STB during the hearing.

Leaning on that judgment, Mr Rajah pointed out that Horizon Towers’ majority sellers had done the same - they had brought the missing pages to the attention of the STB during the August hearing.

He also argued against the minorities’ claims that the board - which heard the Horizon Towers’ application - had no power to amend the defective application. The minorities said the board was not properly constituted because the application, which leads to the constitution of the board, was defective.

But Mr Rajah said that regulations - and the Parliament’s recent amendments to en bloc rules - clearly show that the board was properly constituted, upon receiving the application, and had the power to cure any defects.

He concluded by asking the court to consider the facts of this case and decide if an entire application could be rendered invalid because of two missing pages.

Justice Choo adjourned the hearing to next week, at a date to be set later, when he will deliver his judgment on the appeal.

TENSIONS ran high at the already prickly Horizon Towers hearing yesterday, as lawyers fought over who would have the last word.

The heated exchanges lasted less than an hour but they were more hostile than any of the previous day-long sessions since last Friday.

They brought to a close the appeal over the estate’s bungled collective sale - an appeal peppered by barbed comments between highly paid lawyers and regular jeers and boos from the public gallery.

The only lawyer scheduled to speak yesterday was Senior Counsel Chelva Rajah of Tan, Rajah and Cheah. He represents the condominium’s majority owners, who have asked the High Court to overturn the Strata Titles Board’s (STB’s) dismissal of their collective sale application in August.

Mr Rajah was to reply to arguments made by the minority owners’ lawyers on Tuesday. The minority owners want the STB decision upheld.

But even before he could speak, Senior Counsel K.Shanmugam - representing the Horizon Towers buyers - attempted to have the final say. He asked Justice Choo Han Teck for ‘10 to 15 minutes’ after Mr Rajah’s speech to address some of the ‘new’ points raised on Tuesday.

Barely had Mr Shanmugam finished his request when Senior Counsel Michael Hwang and Senior Counsel K.S. Rajah, who each represent a different group of minority owners, were on their feet to object.

Although Justice Choo stayed the conflict by asking Mr Chelva Rajah to proceed with his remarks, Mr Shanmugam rose again once Mr Rajah was finished.

His plea to be allowed a response was interrupted by Mr Hwang, who said it would be ‘unfair’ to allow Mr Shanmugam ‘a second bite of the cherry when he should have said all this in the first place’.

Justice Choo proposed two peace options: either Mr Shanmugam got five minutes to speak, or all the lawyers were to read his new points and respond in writing within the day.

Mr Hwang opted for the second option almost at the same time that Mr Shanmugam chose the first. It all looked quite comic to the tittering public gallery but the tension in the courtroom remained high, prompting Justice Choo to close the session without allowing Mr Shanmugam’s speech.

In the end, only Mr Rajah had a say yesterday. He noted that Parliament will soon formally give the STB powers to ignore technical flaws - such as the three missing pages in Horizon Towers’ collective sale application - showing that the STB was always intended to have these powers.

THE government collected $6.3 billion selling state land during the year ended March 31, up from $5.5 billion in the preceding year - but still shy of the record $14 billion for the year ended March 31, 1998.

The bulk of the latest year’s bumper takings came from selling land to the private sector for a total of $3.55 billion, up from the previous year’s $3.3 billion, according to the Singapore Land Authority’s latest annual report.

The SLA also sold $2.75 billion of land to statutory boards such as Singapore Tourism Board, Sentosa Development Corporation and JTC Corp under public sector sales in the latest year, higher than the previous year’s $2.2 billion.

Rental collections for state land and properties (including Temporary Occupation Licence fees) amounted to $514.3 million for the year ended March 31, 2007, up from $387.3 million in the preceding year.

The SLA reported a 39 per cent increase in net surplus to $13.67 million, on the back of a 9.7 per cent improvement in total income to $88.6 million. Operating income from land sales agency fees as well as title registration and related fees went up 10 per cent.

To meet competing demands for space for office, business, educational and commercial uses during the past year, the SLA stepped up to meet increased demand for state properties. In January to September, 13 state properties were turned into dedicated office space to help ease the supply crunch in this market.

The occupancy rate of state properties managed by SLA rose to 86 per cent in the latest year, up from 82 per cent in the preceding year, while the utilisation rate of state land managed by the SLA rose to 77.8 per cent from 76 per cent previously.

As custodian of state land and properties, the SLA manages about 14,000 hectares of state land and about 5,000 state buildings that have been put to use as offices, education centres, restaurants, recreational, retail and hospitality space. Its stock of buildings includes about 700 colonial ‘black and white’ residential bungalows.

THE booming property market sent sales revenue at the Singapore Land Authority (SLA) to a nine-year high of $6.3 billion.

Its bumper result was still well shy of the record return achieved in the 1997 financial year, when the red-hot market pushed sales revenue to $14 billion.

The SLA manages state properties and also sells them to private companies and other government agencies at market value.

Its annual report out yesterday showed that it sold $3.55 billion worth of land to the private sector in the 12 months ended March 31 - about 8 per cent higher than in the previous year.

Some of this land included plots in Lim Chu Kang, which the SLA specially designated for agricultural and entertainment use.

A further $2.75 billion came from land sold to other government agencies, such as the 21ha plot for the Marina Bay integrated resort. This was bought by the Singapore Tourism Board for $1.2 billion and later taken over by developer Las Vegas Sands.

Rental revenue grew 33 per cent to $514 million, bolstered by takings from the booming Tanglin Village food and beverage cluster and the lease of the former Pearl’s Hill Primary School, which is being turned into a boutique hotel.

Tanglin Village, in the Dempsey Hill area, is a thriving development of upmarket restaurants, bars and other businesses that have sprouted on the refurbished former military buildings managed by the SLA.

The authority helped to make the cluster more appealing by adding entrance and building markers, as well as creating an outdoor space for events.

Another state property adapted for new purposes is the former Changi Hospital, which the SLA tendered for use as a spa and resort development. The 7,900 sq m property is undergoing a $20 million makeover.

The authority’s recent business-friendly moves have been noticed by property consultants such as Mr Ku Swee Yong.

The director of marketing and business development at Savills Singapore suggested that the SLA could try extending the leases of its rental properties so that businesses would be more inclined to sink money into refurbishing state real estate.

Many of the SLA’s properties are rented on three-year leases, which can be renewed up to nine years, but this may not be enough for a business to make a profit from its investment, said Mr Ku.

The SLA’s operating surplus grew by 35 per cent to $17.1 million.

Meanwhile, another state agency, the Urban Redevelopment Authority (URA), collected $2.7 billion from land sales in the financial year ended March 31.

Although the URA sold 16 sites in that period, compared with nine the year before, sales revenue dropped by 5 per cent because last year’s takings were bolstered by high-value sites such as the business and financial centre in Marina Bay and the commercial plot at Orchard Turn.

The URA’s operating surplus more than tripled to $14.8 million, helped by higher agency fees from selling sites and income from processing more applications for development.

‘We have observed tenants’ increasing resistance to rental hikes,’ he said. ‘Occupiers are more prepared to explore lower-cost locations and alternative premises such as business parks and high-tech space.’

CBRE’s analysis of Q3 2007 data shows prime office rents averaged $12.60 psf per month, an increase of 16.7 per cent quarter on quarter (QoQ) and 82.6 per cent year on year (YoY).

Grade A office rents now average $14.90 psf per month, an increase of 13.7 per cent QoQ and 96.1 per cent YoY.

CBRE said that at end-August, full potential supply - the sum of known private sector project supply, awarded Government Land Sales sites and potential supply from expected future land sales - was 10.8 million sq ft for 2007-2012.

This reflects an increase of 147 per cent from full potential supply of 4.4 million sq ft identified two quarters ago at end-March 2007 and works out to average potential annual supply of 1.8 million sq ft for the next six years, higher than the past 10-year average supply of 1.5 million sq ft per annum.

Based on projected average annual take-up of 1.6 million sq ft for 2007-2012, CBRE forecasts relative equilibrium between supply and take-up over this period, remaining in the range of 91 to 95 per cent even if full potential supply materialises.

‘On the supply side, the government’s reaction has been measured so far, but care is required in monitoring any future change in demand for office space,’ says CBRE.

‘As such, it may be timely for all in the sector - landlords, tenants, policy-makers - to take stock of the market dynamics in setting out policy and making decisions.’

The temptation to keep pushing rents is why Colliers International expects a modest office building at 23 Middle Road to be attractive.

The indicative price for the six-storey building - which has a total gross floor area of 23,499 sq ft and a net lettable area of 17,314 sq ft - is $28 million or $1,600 psf of net lettable area.

Colliers’ executive director for investment sales Ho Eng Joo says: ‘If tenants in the CBD have to pay more than $10 psf per month they may as well consider buying their own property rather than face landlords who keep raising rents.’

Mr Ho expects accountancy and law firms may be among the bidders for the Middle Road building.

With space tight, office property also has good investment potential.

Based on average rent of $6-$8 psf per month in the Middle Road area, Mr Ho expects an investment yield of 4-5 per cent.

DEPARTMENT stores like Robinson’s and Isetan may have been the retail giants of yesteryear but they need to reinvent themselves in order to stay relevant to consumers and mall owners.

If their sales figures cannot keep up with rising rents, then they must find some way to become more productive, said CapitaLand Retail chief executive Pua Seck Guan yesterday.

He said department stores pay far less in rentals than speciality stores, which have shot up in number and popularity in recent years.

Department stores generally pay less rent on a per sq ft (psf) basis as they take up large spaces.

They are charged about $5 psf to $7 psf per month, Mr Pua said. Yet smaller fashion boutiques can pay over $20 psf on average.

Mr Pua, who was speaking on the sidelines of the CapitaLand International Advisory Forum, was responding to comments from Robinson chief executive John Cheston earlier this week.

Mr Cheston had told The Straits Times that department stores are now facing more challenges as new malls shun them in favour of smaller speciality stores paying higher rents.

He said department stores are being squeezed by landlords for higher rents even though they cannot afford to pay them.

CapitaLand gave its side of the story yesterday. The company - one of Singapore’s biggest mall landlords, with Plaza Singapura and Tampines Mall under its belt - had said it will not put a department store in its newest mall, Ion Orchard.

Mr Pua said this was because mall owners have their own problems, as land and property prices soar.

CapitaLand was ‘prepared to pay above $1 billion for the Ion Orchard site’, he said. But he added that at that level, ‘we cannot afford to have a department store pay us $5 psf to $7 psf’ monthly. This ‘cannot match the land value’.

‘Even supermarkets and food courts today are getting more productive and paying more in rents,’ he said. They easily rack up sales of $100 psf - double that of department stores - and pay double the rent, too, Mr Pua added.

Department stores have become less relevant especially in suburban malls like Tampines Mall and Junction 8, he said.

‘I would argue that even if I shut down the anchor tenants, I would still have the same level of traffic’ in those malls - up to two million customers a month.

But he was quick to praise department stores like Robinson’s for adapting quickly by bagging new brands and opening stores.

Indeed, Macquarie Meag Prime Reit, which owns Wisma Atria and Ngee Ann City, said the department stores in its malls have been an important pillar.

The lasting popularity of Isetan and Takashimaya is a testament to their solid branding and constant reinvention of their extensive product offerings, it said.

I REFER to Mr Ng Zhong Ren’s letter, ‘Why did Iras up property valuation one year later?’ (ST, Sept 29).

Mr Ng asked why Iras’ letter of June 18 was received by his lawyer only on July 17. Iras had, since October last year, been corresponding with the law firm that acted for him in the property transaction. Our letter of June 18 was thus sent to this same law firm. Iras was subsequently informed by another law firm that it had taken over the case and that it had received the said letter on July 17. We have since contacted Mr Ng and have followed up with him separately on this matter.

Property buyers are required to pay stamp duty based on the transacted price of the property or its market value, whichever is higher. Where Iras has assessed that the property value declared for stamping purposes is below the market value, it will determine the stamp duty based on market value at the date of the property transaction and recover the additional stamp duty from the buyer. The market value of the property is determined based on sales evidence of similar properties.

A property transaction may be selected for stamp-duty audit within six years from the date of transaction. The property buyer or his appointed lawyer will be required to submit relevant documents, such as the sales agreement, for verification and stamp-duty assessment. Mr Ng’s case was picked for adjudication as the property value declared for stamping was below the market.

Any objection by the property buyer on the valuation determined by Iras must be substantiated with supporting documents. Notwithstanding the objection, stamp duty has to be paid promptly in order to avoid any late-payment penalties.

Office blocks continue to change hands as the market sizzles. Allco Commercial Real Estate Investment Trust has just bought KeyPoint in the Jalan Sultan/Beach Road area for $370 million or $1,186 per square foot (psf) of net lettable area (NLA). The deal includes income support of up to $10.5 million for two years to be provided by the seller.

A deal for 78 Shenton Way is believed to be at an advanced stage of negotiation, with the price pegged slightly below $700 million. The buyer is said to be a property fund linked to Germany’s Commerz Grundbesitz Investmentgesellschaft (CGI). CGI is the capital investment company for the open-ended fund Haus-Invest, and a deal for 78 Shenton Way, when it materialises, will mark CGI’s first major property acquisition in Singapore, sources say.

All eyes in the market are also on Hitachi Tower at Collyer Quay, to see if a fresh benchmark will be set soon. The latest price being bandied about for the 999-year leasehold property is said to be around $3,000 psf of NLA, lower than the $3,200 psf and $3,300 psf discussed a few months earlier. The parties that had made offers at those pricing levels have since walked away from the negotiating table.

Industry observers suggest that a natural contender for Hitachi Tower now could be the Goldman Sachs group. In August, a Goldman Sachs-linked fund bought the next-door Chevron House (formerly known as Caltex House) for $2,780 psf, a record for an office block here. ‘A higher price can be justified for Hitachi Tower because it has a superior tenure (999-year leasehold) and orientation,’ a market watcher notes.

‘Another important difference between these two buildings is that for Chevron House, there are rental caps in (major tenant) Chevron’s lease agreement, which limits the near-term rental upside that the building’s owner can achieve,’ he added.

Hitachi Tower is 50:50 owned by CapitaLand and National University of Singapore. The 37-storey property has an NLA of around 280,000 square feet. Chevron House is on a site with a remaining lease of about 81 years.

Some industry observers think that it makes sense for Goldman to own two adjoining office blocks as it can then take advantage of synergies in managing them, as well as tap the possibility of redeveloping the properties in the longer term - or at least pitch that angle to potential buyers of the two properties when it wants to divest them in future.

A Goldman Sachs real estate fund also bought DBS Towers 1 and 2 on Shenton Way in November 2005 for $690 million or around $800 psf of NLA.

As for 78 Shenton Way, which CGI is in negotiations to buy, the acquisition will be based on a total NLA of 365,000 sq ft, which includes some 65,000 sq ft that the seller, a joint venture between Credit Suisse and CLSA funds, has undertaken to build for the asset. The site has a remaining lease of about 75 years.

KeyPoint at Beach Road stands on a site with a remaining lease of 68 years. It is being sold by Sable Resources, whose key shareholder is Han Chee Juan, who teamed up with a group of investors to buy the 25-storey property, formerly known as Jalan Sultan Centre, in 1996 from the former Pidemco Land.

Their acquisition price was $125 million and the group completed a $35 million refurbishment of the asset in early 2000.

Buyer Allco Reit said the assumed initial net property income yield for the first 12 months is 4.65 per cent, inclusive of the $10.5 million income support. The acquisition will be fully debt-funded with a cost of debt of about 3.6 per cent. The trust’s leverage will increase from 33.2 per cent to about 46.5 per cent after the completion of the acquisition, Allco said. DTZ Debenham Tie Leung brokered KeyPoint’s sale.

KeyPoint currently has an NLA of 311,892 sq ft, of which about 89.4 per cent is offices and the remaining 10.6 per cent retail space. KeyPoint also has 227 car-park lots.

SINGAPORE: It’s not just property developers who are riding the current industry boom.

Established construction companies that struggled through the stormy late 90s are now experiencing a robust turnaround, and are commanding price tags which are up to 20 percent higher than their smaller peers.

That’s because there are not enough of them to go around in a market awash with developers who want only the best for their projects.

The larger number of projects is an obvious factor, but there is another key reason for the squeeze. A number of contractors had gone bust, and for those still around, most have been down-sized.

Kunalan Sivapuniam, managing partner at Emirates Tarian, said: “Developers are very cautious about quality. We are also faced with discerning buyers who want to pay for quality. So you have to look for quality contractors. If you look at category A or grade one contractors, there are not that many now.”

Industry watchers said that going forward, top grade construction firms may command premiums higher than now.

Song Seng Wun, regional economist at CIMB-GK Research, said: “At this juncture, we are at the beginning of the upturn of the construction cycle. I suspect in the coming few years, the construction firms will do quite well.”

Developers say higher costs could be passed down to home buyers.

Emirates Tarian’s Kunalan Sivapuniam said: “It’s hard to say how much of that is going to be passed on. It’s a question of whether they are in a hurry to launch the projects, in which case they have to bite the bullet.

“If you have developers that are able to hold on to their projects and launch them over a longer period of time, then they would be able to pass on a lot of this, because the market is rising.”

As this demand bulge moves further down the pipe, industry players say related services like interior design and electrical fittings can also look to rosy days ahead.

According to some estimates, the value of construction contracts awarded this year will hit more than S$20 billion.

ONE of the biggest challenges that CapitaMall Trust (CMT), Singapore’s first and still its largest real estate investment trust (Reit), faces when it comes to timing the release of information is balancing the needs of sophisticated institutional investors and mom-and-pop retail investors.

And it needs to further weigh that against how the information released will impact the trust’s negotiations with the authorities on renovations to its assets, tenants, and property sellers.

‘The Singapore Reit industry is only about five years old and many local investors have still not achieved the level of sophistication of their counterparts in more mature Reit markets such as Australia and the US,’ as Pua Seck Guan puts it. He is CEO of CapitaMall Trust Management Ltd (CMTML), the manager of CMT. The trust has grown from owning just three malls here worth $930 million when it was floated in July 2002 to 13 properties in Singapore today worth over $5 billion. These include Tampines Mall, Junction 8, IMM Building, Sembawang Shopping Centre, Bugis Junction and a 40 per cent interest in Raffles City Singapore.

In addition, CMT has a 20 per cent stake in CapitaRetail China Trust (CRCT), which owns a portfolio of seven malls worth around $690 million in Chinese cities like Beijing, Shanghai, Zhengzhou, Huhehaote and Wuhu.

‘Our investment in CRCT and participation in Singapore development projects are expected to drive continuous long-term growth for unitholders. CMT targets to grow its asset size in Singapore from its current $5.7 billion to $8 billion by 2010,’ Mr Pua says.

CMT is the largest Reit in Singapore by market capitalisation (about $6 billion as at Oct 1) and asset size.

The winner of SIAS - Most Transparent Company Award 2007, under the Reits section, CMTML stresses that upholding the highest level of corporate governance and transparency standards towards good investor relations practices is tied to the fundamentals of a Reit.

A Reit provides unitholders with regular income streams, coupled with growth in unit price over time.

Reits return virtually all, if not all, of their income to unitholders, and Reit managers publicly forecast the Reit’s income in terms of distribution per unit. The price at which the Reit trades in the stock market is a function of a given yield and total return expectation by investors.

Hence, timely disclosure of information affecting a Reit’s income is important to facilitate investors’ decision-making process.

‘We believe our consistent effort on this front has been well received by the investment community, which has led to our winning this prestigious award by SIAS for the fourth consecutive year,’ Mr Pua says.

CMT has delivered a total return of about 302 per cent as at June 30, 2007 to unitholders since its listing in July 2002, with about 254 per cent comprising capital appreciation of CMT’s unit price and 48 per cent coming from distributions to unit holders.

The gap between prices fetched by new and resale homes in the prime districts is now at a record high, an analysis of official data shows.

A preliminary analysis of caveats lodged in the third quarter of 2007 by Jones Lang LaSalle (JLL) shows that for new homes there was a record premium of over 60 per cent from July to September this year.

Since 2000, the average premium has been between 20 and 42 per cent, JLL said.

But strong demand for new luxury projects in the third quarter - such as for Scotts Square, Cliveden at Grange, Helios Residences and The Lumos - means that the price gap between new apartments and homes in the resale market has widened rapidly over the past year, said Chua Yang Liang, JLL’s head of research for South-east Asia.

In addition, prices of new homes could be climbing faster as buyers can use the deferred payment scheme for new projects, but not for resale units, said Knight Frank’s director of research and consultancy Nicholas Mak.

Resale transactions take into account sales of homes in completed developments, while sales of new units are in projects that have been launched, but are yet to be built.

However, JLL added that gap is likely to narrow as prices of resale homes will look more attractive.

‘Buyers will find it increasingly less attractive to purchase new developments when perfectly habitable resale dwellings at much more affordable price range are readily available,’ Dr Chua said.

The preliminary average selling price for new sales - based on caveats lodged in the prime districts - is estimated to be around $2,500 per square foot (psf) in the third quarter, JLL said.

In comparison, amidst the continuous strong interest in new sales, prices in the resale market rose to close at an average of $1,220 psf for the same three months, albeit during a traditionally seasonal weaker period.

This puts the price gap at around 105 per cent, but JLL’s Dr Chua says that once more caveats are lodged for third quarter transactions, the gap will come to ‘more than 60 per cent’.

In the short term, the high premium gap seen in the third quarter is unlikely to be sustained, experts said.

JLL, for one, estimates that the price gap will stabilise to between 32 per cent and 38 per cent over the next three to five years.

But with the gap narrowing, the collective sales market can be expected to slow down, JLL said.

‘The attractiveness and success of en bloc transactions depends largely on this premium gap. The wider the gap, the more attractive is the market for collective sales,’ the property firm said.

Dr Chua reckons that the collective sales market is likely to slow down in the medium term, given that growth in new sales prices are likely to decline over the same period.

As the premium gap narrows, en bloc activities should slow down as developers find it increasingly less attractive to undertake such redevelopments, especially in light of diminishing returns and impending changes to the Strata Titles Act.

Source : Business Times - 5 Oct 2007, an analysis of official data shows.

A preliminary analysis of caveats lodged in the third quarter of 2007 by Jones Lang LaSalle (JLL) shows that for new homes there was a record premium of over 60 per cent from July to September this year.

Since 2000, the average premium has been between 20 and 42 per cent, JLL said.

But strong demand for new luxury projects in the third quarter - such as for Scotts Square, Cliveden at Grange, Helios Residences and The Lumos - means that the price gap between new apartments and homes in the resale market has widened rapidly over the past year, said Chua Yang Liang, JLL’s head of research for South-east Asia.

In addition, prices of new homes could be climbing faster as buyers can use the deferred payment scheme for new projects, but not for resale units, said Knight Frank’s director of research and consultancy Nicholas Mak.

Resale transactions take into account sales of homes in completed developments, while sales of new units are in projects that have been launched, but are yet to be built.

However, JLL added that gap is likely to narrow as prices of resale homes will look more attractive.

‘Buyers will find it increasingly less attractive to purchase new developments when perfectly habitable resale dwellings at much more affordable price range are readily available,’ Dr Chua said.

The preliminary average selling price for new sales - based on caveats lodged in the prime districts - is estimated to be around $2,500 per square foot (psf) in the third quarter, JLL said.

In comparison, amidst the continuous strong interest in new sales, prices in the resale market rose to close at an average of $1,220 psf for the same three months, albeit during a traditionally seasonal weaker period.

This puts the price gap at around 105 per cent, but JLL’s Dr Chua says that once more caveats are lodged for third quarter transactions, the gap will come to ‘more than 60 per cent’.

In the short term, the high premium gap seen in the third quarter is unlikely to be sustained, experts said.

JLL, for one, estimates that the price gap will stabilise to between 32 per cent and 38 per cent over the next three to five years.

But with the gap narrowing, the collective sales market can be expected to slow down, JLL said.

‘The attractiveness and success of en bloc transactions depends largely on this premium gap. The wider the gap, the more attractive is the market for collective sales,’ the property firm said.

Dr Chua reckons that the collective sales market is likely to slow down in the medium term, given that growth in new sales prices are likely to decline over the same period.

As the premium gap narrows, en bloc activities should slow down as developers find it increasingly less attractive to undertake such redevelopments, especially in light of diminishing returns and impending changes to the Strata Titles Act.

HOME owners are going ahead with collective sales, with Colliers International marketing two new freehold sites.

One site, Hertford Mansion, is located at Hertford Road/Bristol Road, near Farrer Park, and the indicative price for the 11,527-square-foot plot is $12 million or $744 per sq foot per plot ratio (psf ppr).

The other site, Holland Hill Lodge, is expected to fetch $16 million. This works out to $1,108 psf ppr for the 9,033-sq-ft site.

Home owners’ price expectations may have been affected by the resent US sub-prime mortgage crisis as well as new requirements for collective sales. Colliers executive director (investment sale) Ho Eng Joo said: ‘Sellers have to be more realistic in the event that the en bloc sales slow down. It’s always a two-way traffic.

‘Every owner would, of course, like to sell their property at a price as high as possible. But, they also need to take into consideration whether developers are willing to pay the price.

‘Developers will be watching very closely the launches of new projects in order to price their costs of acquisition.’

With the process of organising an en bloc sale likely to be slower than before, Mr Ho expects the buying interest of developers could turn towards the city fringe and/or suburban areas where prices are lagging behind the high-end market.

The break-even cost for Hertford Mansion is about $1,100-$1,200 psf.

Mr Ho believes that given the flat contour and the regular shape of this site, the successful bidder could redevelop it into a boutique residential development with a five-storey block accommodating 20 units of 900 sq ft each.

The break-even price for Holland Hill Lodge is approximately $1,500-$1,600 psf. Mr Ho said: ‘Given that all the owners have already consented to proceed with the sale, there is no need for approval from the Strata Titles Board. As such, the legal process of transferring the ownership can be expected to complete within three months.’

BANYAN Tree, a leading manager and developer of premium resorts, hotels, spas and galleries, is on an aggressive expansion push to more than double its global portfolio by 2010.

Banyan Tree executive chairman Ho Kwon Ping said it is moving into new markets in Latin America, the Caribbean, the Mediterranean and the Middle East, in addition to stepping up its presence in South-east Asia, the Indian Ocean and North-east Asia (China and Korea).

The group’s investments will involve new projects as well as organic growth as it continues to improve and add capacity to existing properties, he said in an interview on the sidelines of celebrations to mark its 20th year in Phuket. On Phuket island, where the flagship Banyan Tree resort is located, plans are afoot for a new project adjacent to the existing 600-acre Laguna Phuket which houses six properties that are built on land which has been rehabilitated from a polluted abandoned tin mine.

Banyan Tree subsidiary, Laguna Resorts and Hotels, has just concluded a joint-venture agreement with a prominent local Phuket businessman Kanit Yongsakul to develop the 7 million sq ft plot for housing, retail and commercial uses (including office space), plus a hotel. To be called Laguna Lake, the project is expected to reach the peak of development in three to four years.

The potential revenue contributions from this development could be S$400 million to be realised over a medium-term period, the company said.The residential portion of the development will offer upscale condominium units, bungalows and townhouses.

Mr Ho also revealed that within Laguna Phuket, the group plans to add a seventh hotel. This one will be under its Angsana brand. Room rates will be the second highest after the flagship Banyan Tree Phuket.Construction of the 150-room property will start next year and is scheduled to be completed in 2009. It will cost 1.5-2 billion baht (S$70-93.4 million).

The group’s first hotel to open in Laguna Phuket in 1987 was the Dusit Laguna. This was followed by the other five properties, Laguna Beach Resort, Sheraton Grande Laguna Phuket and The Allamanda (all suites), Banyan Tree Phuket and the Laguna Holiday Club (time-share units).

Laguna Phuket has become the reference point for the group’s projects elsewhere, such as Laguna Vietnam whose construction will start early next year near Hue in central Vietnam. Mr Ho hopes this project will replicate the success of Laguna Phuket.

On Banyan Tree’s global expansion plans, Mr Ho said: ‘We want to have strong growth in the next one to three years. Given the strong pipeline of projects that we have - over 40 new hotels (compared with our current existing portfolio of 22) and at least 55 spa projects, we are confident of our growth plan.

‘The key drivers will come from three core segments - hotel investment income, fee-based income (such as hotel, spa and design management fees) and property sales. Based on existing signed and sealed contracts that we have, we would have about 60 hotels and resorts by 2010. This is bearing in mind that we will continue to work on increasing this figure.’

Banyan Tree adopts a practical approach in its quest to spread its roots. Its strategy is to further expand into low-cost locations close to its key customer markets.

Mr Ho elaborated: ‘In some of these so-called ‘low-cost’ regions, such as China and Mexico (Latin America), we have managed to leverage on the growth in the tourism sectors there to accelerate our growth there. These regions account for over 20 existing projects in development and continue to present more opportunities for growth.’

Mr Ho is a firm believer in nurturing a brand instead of relying on cost competitiveness. He said: ‘One prevalent business model in Asia is to use low cost labour - with many companies manufacturing for other people, as opposed to developing their own brand. My view is that this is not a sustainable business model because someday someone cheaper will come along.

‘The key to success is to invest in a brand and build it - like what we have done with Banyan Tree. We need to compete on brand, not cost competitiveness, which takes long-term commitment and mindset, and to be close to the market,’ he said.

‘Banyan Tree is all about creating unforgettable, deeply personal and cherished memories. It is about the romance of travel and connecting people with a ’sense of place’ through the design and architecture of our resorts, that promotes the uniqueness of indigenous cultures of the place. As we have our own full-time in-house design capabilities, we are therefore able to graft the ‘Banyan Tree’ experience onto our real estate offerings from the ground up.’

‘Banyan Tree’s business model is to be in exotic destinations, and places like China and Latin America offer a plethora of such destinations. One of the reasons for Banyan Tree’s success is that we have stayed in our niche. It’s like within this ’sandbox’, as long as we are the King of the hill, we could be No 1.’

He added: ‘In our space, going global is not about having a few hundred hotels and resorts, but a necklace of jewels that span the globe with a representation in every key market. It is not about being everywhere, but being where we need to be to remain among the best of the best.’